[Invest&Law] NH Investment & Securities Wins Second Trial in 'Optimus Fund' Administrative Lawsuit

NH Securities Sells 670 Billion Won in Optimus Funds
Disputes Partial Business Suspension and Employee Disciplinary Action... Wins Both First and Second Trials
If Finalized, Financial Authorities' Sanctions Will Lose Effect

NH Investment & Securities (NH Securities) won again in the second trial of the administrative lawsuit it filed to cancel the financial authorities' sanctions related to the sale of the Optimus fund. The financial authorities have recently suffered consecutive defeats in related administrative lawsuits, including losing the first trial of the heavy disciplinary appeal lawsuit filed by former NH Securities CEO Jung Young-chae.

According to the legal community on the 25th, the Seoul High Court Administrative Division 7 ruled on the 20th in the appeal trial of NH Securities' lawsuit against the Financial Services Commission and the Financial Supervisory Service to cancel the "three-month partial suspension of business and employee disciplinary action," ruling in favor of NH Securities as in the first trial. If the financial authorities do not request a Supreme Court ruling within the period, the sanctions against NH Securities will lose their effect.

This lawsuit originated from the "Optimus incident" that broke out in 2020. At that time, Kim Jae-hyun, then CEO of Optimus Asset Management, promoted the fund as a "safe product investing in public institution accounts receivable, etc.," raising investment funds worth about 1 trillion won, but used them for acquiring bad bonds and fund recycling, causing the fund redemption to be blocked.

NH Securities was the largest seller, accounting for about 80% of the principal of the non-redeemed fund. It was revealed that from June 2019 to May of the following year, NH Securities sold a total of 679.4 billion won worth of Optimus funds to about 1,300 investors. In 2022, the financial authorities imposed sanctions, and NH Securities filed an administrative lawsuit in protest.

During the trial, the financial authorities argued, "Although the investment target assets and structure were uncertain, NH Securities provided investors with a definitive judgment such as 'more than 95% of the investment is in public institution accounts receivable'." NH Securities countered, "We simply explained the management strategy according to the fund investment proposal. From the seller's perspective, we sufficiently verified and checked the fund. Even if it was a violation of regulations, the financial authorities' sanctions are excessively harsh," they argued.

The first trial ruled to "cancel the financial authorities' sanctions." The reason was that there was no evidence to consider that NH Securities led the fund setup by substantially deciding the fund's profit structure or risk factors. The court said, "Although NH Securities' duty of care to protect investors may have been insufficient, it is difficult to see that they provided investors with a 'definitive judgment.' At that time, NH Securities did not have the authority to actively request fund management information from the asset management company." The second trial court also upheld the first trial's conclusion and dismissed the financial authorities' appeal.

Meanwhile, the financial authorities also lost the first trial of the heavy disciplinary appeal lawsuit filed by former NH Securities CEO Jung Young-chae related to Optimus on the 6th of last month. In 2023, the financial authorities issued a disciplinary warning restricting Jung's employment as a financial company executive for three years. The first trial court said, "NH Securities has already properly established internal control standards," and added, "Requiring the detailed procedures demanded by the financial authorities to be established as internal control standards is an excessively detailed and trivial matter beyond the level required by law."